The international rating agency Fitch revised Azerbaijan’s credit forecast from “negative” to “stable”, confirming its credit rating at “BB +”.
In a February 2 announcement, Fitch said that after two years of instability in 2017, Azerbaijan improved macroeconomic stability.
Along with the restoration of oil prices, a strict fiscal and monetary policy was implemented, which allowed to stabilize the exchange rate of the manat in the range of $ 1.70 from April 2017.
This, in turn, helped ease the pressure on inflation, which on average in 2017 decreased by 12.9% on a monthly basis from April 2017.
Fitch forecasts that in the next two years the exchange rate will remain unchanged due to the stable assumption of oil prices.
With rising oil prices, the surplus of the balance of payments for 2017 was 3.1% for the whole year of 2017.
Assets of the State Oil Fund (SOFAZ) grew from $ 33.1 billion in 2016 to $ 35.8 billion in 2017, which is 87.4% of GDP.
Fitch’s concern is the strong dependence of the economy on raw materials, which probably will not change in the near future.
In particular, the agency notes that the expected growth in gas exports after the entry into force of the Southern Gas Corridor project and dependence on commodities will grow even more.
Although plans for economic diversification are on the agenda of the authorities, the initiatives put forward in the roadmaps of reforms are seen as distant, Fitch noted.
The agency also warned that deteriorating macroeconomic stability and weak economic growth could lead to a negative rating assessment, while good results of economic diversification and business environment could pave the way for a positive rating assessment.